Modest Gains Buoy Stock Market Rally
Stocks rose modestly Thursday, keeping the market rally intact despite dismal economic news, as investors continued pinning their hopes on recovery in the year’s second half.
“A lot of people don’t want to miss the rally and are gobbling everything in sight,” trader Michael O’Hare of Lehman Bros. told Reuters. “Supply is being met with incredible demand.”
Investors got a boost from retail stocks after many of the nation’s leading chains reported stronger-than-expected May sales.
The Dow Jones industrial average was almost unchanged, up 2.32 points to 9,041.30; the Standard & Poor’s 500 index climbed 3.90 points, or 0.4%, to 990.14; and the technology-laden Nasdaq composite index gained 11.36 points, or 0.7%, to 1,646.01. The Dow and S&P; 500 closed at their highest levels since last summer, while the Nasdaq reached its best finish since May 28, 2002.
Winners led losers by almost 2 to 1 on the New York Stock Exchange and Nasdaq in active trading.
Investors shrugged off two reports showing the latest signs of a sluggish economy. Before the market opened, the government said the number of people applying for initial jobless benefits rose last week to 442,000, worse than forecast and the highest level in more than a month. Meanwhile, new orders for factory goods in April posted their largest drop in 17 months in April, sinking 2.9%.
The weekly figure raised anxiety before today’s closely watched U.S. jobs report for May. Analysts expect the unemployment rate to have risen to 6.1% last month from 6% in April, so a surprise in either direction could affect today’s trading.
Analysts fear that a lack of job growth may restrain consumer spending, which accounts for 70% of the U.S. economy.
“Companies aren’t ready to hire,” Stuart Schweitzer, global strategist at J.P. Morgan Fleming Asset Management, told Bloomberg News. “[They] are going to require more convincing signs of a lasting improvement.”
The retail sector was an economic bright spot Thursday. Wal-Mart Stores gained 76 cents to $54.62, J.C. Penney added 73 cents to $18.58 and Sears rose $1.98 to $34.69.
Among specialty chains, AnnTaylor Stores added $1.24 to $28.48 after boosting its profit estimate for the year and Best Buy jumped $2.33 to $42.80 after first-quarter profit exceeded the company’s forecast.
“The consumer is fine, so the market is not overly concerned with the employment numbers,” Doug Cote, a money manager at ING Aeltus Asset Management, told Bloomberg.
Since mid-March, the S&P; 500 index has risen 24%, the Dow has gained 20% and the Nasdaq has rallied 29% on expectations that economic growth will accelerate later this year.
Investors got a measure of relief after Thursday’s close when semiconductor giant Intel said second-quarter sales remain on target. After gaining 46 cents to $21.84 in Nasdaq trading, Intel’s stock rose to $22.34 after hours.
The Treasury market was mixed, with the yield on the benchmark 10-year note rising to 3.34% from 3.29% on Wednesday.
Gold climbed $6 an ounce to $368.60 while oil added 69 cents a barrel to $30.74. In currency trading, the dollar weakened against the euro and the Japanese yen.
In other highlights:
* The sizzling Nasdaq biotech index rose 6.3%, bringing its year-to-date gain to 49.6%. NPS Pharmaceuticals jumped $5.21 to $28.96, ICOS surged $6.24 to $38.90 and CV Therapeutics climbed $5.52 to $37.80.
* Some retail stocks lost ground, including Albertson’s, which slid $2.64 to $19.18 after cutting its full-year profit estimate, and Payless ShoeSource, which fell 95 cents to $13.90 after reporting slower-than-expected May sales.
* Johnson & Johnson sank $2.04 to $52.04 after Morgan Stanley cut its price target and earnings growth estimates on the company, citing rising competition for its anemia and arthritis drugs.
* Microsoft fell 78 cents to $24.09 after Chief Executive Steve Ballmer said it faces significant challenges from free Linux software and slower corporate spending on information technology.
* Utility stocks were weak, including Edison International, down 67 cents to $16.08; Southern Co., down 85 cents to $30.96; and Exelon, off $1.39 to $58.10.
Market Roundup, C6-7
